Question 6 of 1025

In the first audit of a new client, an auditor was able to extend auditing procedures to gather sufficient evidence about consistency. Under these circumstances, the auditor should:

Answer

Suggested Answer

The suggested answer is B.

Choice "b" is correct. The auditor's standard report implies that the auditor is satisfied that the comparability of financial statements between periods has not been materially affected by changes in accounting principles and that such principles have been consistently applied between or among periods.
Since the auditor has gathered sufficient evidence about consistency, no reference need be made in the report.
Choice "a" is incorrect. If the auditor is able to obtain sufficient evidence about consistency, the auditor may report on the entity's financial statements.
Choice "c" is incorrect. The consistency standard is one of the ten GAAS, and it does apply to this audit.
Choice "d" is incorrect. If the auditor is able to obtain sufficient evidence about consistency, no mention of consistency need be made. Consistency is implied in the standard report.
Question 7 of 1025

The third general standard states that due care is to be exercised in the performance of an audit. This standard is ordinarily interpreted to require:

Answer

Suggested Answer

The suggested answer is D.

Choice "d" is correct. The third general standard of due care is ordinarily interpreted to require critical review of the judgment exercised at every level of supervision, and the judgment exercised by those assisting in the audit.
Choice "a" is incorrect. The third general standard of due care does not require a thorough review of the existing safeguards over access to assets and records.
Choice "b" is incorrect. The standard of due care does not specifically require a limited review of the indications of employee fraud and illegal acts.
Choice "c" is incorrect. The standard of due care does not require a review of audit staff training and proficiency.
Question 8 of 1025

The concept of materiality would be LEAST important to an auditor when considering the:

Answer

Suggested Answer

The suggested answer is C.

Choice "c" is correct. Any direct financial interest in a client impairs independence, even if it is immaterial.
Choice "a" is incorrect. A material illegal act may require disclosure in or adjustment to the financial statements, whereas an immaterial illegal act may not require disclosure.
Choice "b" is incorrect. A material weakness in internal control will affect the nature, timing, and extent of audit procedures, whereas an immaterial weakness in internal control may have little impact on the audit.
Choice "d" is incorrect. An auditor is likely to use positive confirmations for material accounts receivable, but may consider negative confirmations for immaterial receivable balances.
Question 9 of 1025

An auditor of a nonpublic company must conduct the audit in accordance with:

I. ASB standards.

II. PCAOB standards.

Answer

Suggested Answer

The suggested answer is A.

Choice "a" is correct. An auditor of a nonpublic company must conduct the audit in accordance with ASB standards.
Choice "b" is incorrect. An auditor of a nonpublic company is not required to conduct the audit in accordance with PCAOB standards.
Choice "c" is incorrect. While an auditor is only required to conduct the audit in accordance with ASB standards, the auditor may choose to follow PCAOB standards as well.
Choice "d" is incorrect. An auditor of a nonpublic company is not required to conduct the audit in accordance with PCAOB standards.
Question 10 of 1025

Because of the risk of material misstatement, an audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of:

Answer

Suggested Answer

The suggested answer is C.

Choice "c" is correct. The auditor should plan and perform the audit with an attitude of professional skepticism. This attitude includes a questioning mind and a critical assessment of audit evidence.
Choices "a", "b", and "d" are incorrect. Objectivity, independence, integrity, and impartiality are basic ethical characteristics and professional qualities embodied in the general standards.